SMRT

[GPD]

Love riddle but hate it when cannot solve. Pls make clear.

[brattzz]

SMRT Corporation Ltd wishes to announce a continuation of the trading halt pending a possible  announcement

Temasek take over? 

brattzz: CPF->SG GOV->LTA->SMRT->IRAS & [NOTHING to temasek] -NOTHING->SG GOV--NOTHING-- >CPF
            
[New flow?]:  Temasek > buyout > SMRT shareholders. Yay! Hahaha...

Dont see the need to privatise leh...the current model: keep high capex assets. outsource to competing private operators. Quite good leh...

haha! huat again!!

temasek really know where to get their money! this time, directly out of LTA/MOT/SG Gov pocket and back!

i am guessing offer price is S$2.50, (factoring in the 1B payout by LTA/MOT/SG Gov)

[HitandRun]

I suppose that the burning question in everyone's mind is why is there a need to privatise when everything is a done deal? Does LTA lack the confidence that the new model will succeed?

Once SMRT gets privatised, it's books will be opaque to everyone. Isn't that a step backwards for transparency?

One possible speculation from me is that it might be related to terrorism matters. The need to "harden" our infrastructure might impose so much constraints/investments that SMRT cannot be expected to operate profitably?

[brattzz]

it's ALL about money.... no way temasek going to let that LTA/MOT/SGGOV/taxpayer's S$1B sneak pass when they own 54% of SMRT right?? they need to top up their piggy!

it has never been about transparency, confidence, reliability, terrorism, welfare for commutators..etc... else, SMRT would have worked out all their technical troubles sooo many years ago! still remember Mdm Saw?

money! money! money! is the most reliable, enough of honey-words!

trains is the backbone of singapore's transportation model, cash cow too! no reason not to squeeze it dry!

[money]

my guess is they are going to offer 1.60, then people make noise, they wayang wayang a bit, then raise to 1.68. The best defence is to say that profit margin from the rail operations is capped at 5%

[specuvestor]

Makes no sense that after all the discussions and reviews, which the largest shareholder would surely be involved, then the takeover

I'll be trying to read between the lines if Temasek really do a General Offer rather than say a Partial Offer or something. Thinking laterally... could it be actually a divestment?

Security now last only 15 years

I think this deal is pretty watershed on the govt's thinking of what is a reasonable margin for transport business in an operator model. I'm not sure how the profit collar works in reality ie for example does a one year bonus for staff pushing OM to below 3.5% qualify? But of course on the structure side transport companies can improve the ROE through capital management but without sizable assets it will be limited.

I think it is a good deal for the public consumer. I think the operator model is a good compromise between capex spending for public / social infrastructure vs Singapore Inc mentality.

I believe the BOD will know what not to do.

[thor666]

Makes no sense that after all the discussions and reviews, which the largest shareholder would surely be involved, then the takeover

I'll be trying to read between the lines if Temasek really do a General Offer rather than say a Partial Offer or something. Thinking laterally... could it be actually a divestment?

Security now last only 15 years

I think this deal is pretty watershed on the govt's thinking of what is a reasonable margin for transport business in an operator model. I'm not sure how the profit collar works in reality ie for example does a one year bonus for staff pushing OM to below 3.5% qualify? But of course on the structure side transport companies can improve the ROE through capital management but without sizable assets it will be limited.

I think it is a good deal for the public consumer. I think the operator model is a good compromise between capex spending for public / social infrastructure vs Singapore Inc mentality.

I believe the BOD will know what not to do.

A la olam.

That would be ingenious move.

Sent from my LG-H818 using Tapatalk

[touzi]

New rail framework falls short of market hopes.
http://www.straitstimes.com/business/com...rket-hopes

The market doesn't think that the new framework is better for shareholder. Temasek is of course the biggest shareholder.

[desmondxyz]

New rail framework falls short of market hopes.
http://www.straitstimes.com/business/com...rket-hopes

The market doesn't think that the new framework is better for shareholder. Temasek is of course the biggest shareholder.

Seems like divestment makes more sense....

[d.o.g.]

WARNING: LONG POST

IMHO the government has finally realized that profits and public services are incompatible. Many observers will say that this is common sense, but common sense is not very common.

So what can the government do? It can simply buy back the hard assets and leave the operating company as a listed entity. The problem here is that there will be a lot of cash trapped in the operating company after the sale of the assets.

A special dividend would invite public anger because it will be seen as a reward to a small group of shareholders at the expense of the general public. So the money cannot be paid out. Yet, it is patently obvious that the operating company will be nothing more than a manpower contractor.

How can you possibly spend $1bn as a manpower contractor? You have no need for capital expenditure, and salaries can be recovered from the government so at most you need only 3-6 months of salary as working capital. And since your payments from the government are guaranteed you could even borrow the salary money very cheaply. So the $1bn cash will be trapped. The only way to recover the cash is to privatize the company.

The same logic applies to SBS Transit. Recently some "investors" have driven up the share price of SBS Transit after the news regarding SMRT. This is utterly stupid because SBS Transit has no rail assets to sell. It never paid for the Northeast Line to begin with so there is nothing to sell. But SBS Transit does have a lot of buses. Again, a special dividend is politically impossible. Therefore a privatization is the most likely outcome. This will allow the government (in the form of Temasek) to recover the cash. Left pocket to right pocket, as some would say.

Once both SMRT and SBS Transit are fully privatized, Temasek can restructure them so that they can compete to operate both trains and buses as per the new contracting model. SMRT and SBS Transit could also merge, with the merged entity (SBRT?) competing for contracts against foreign operators like Tower Transit and Go Ahead.

When such a perspective is adopted, it becomes clear why the allowed operating margin is only 3.5-5%. A high margin would make SMRT (and SBS Transit) more valuable and thus more expensive to privatize. A low margin will also score political points as the government will be seen to be pro-people, always a good thing to store in the vote bank for future elections.

As usual, YMMV.